Boom in hotel construction gives Goa a miss

Posted by Prem , Labels: , , , , Thursday, January 6, 2011 10:02 AM

With the global travel slump now a thing of the past, hotel construction is booming across India, and the value of hotel rooms in the country is set to increase by 60 per cent through 2013. But the boom is yet to reach Goa, a longtime jewel in the country’s tourism crown, because of several hurdles that include a robust bureaucracy; statewide corruption; archaic laws; and stringent environmental regulations.

A new study has highlighted that only a fraction of the new properties that are to open in India will be in Goa. Interestingly, no new rooms are to be added in 2012. According to consultancy firm Knight Frank India, which recently published a study on the hotel room market in India, from 2010 to 2013, around 1,744 new rooms are expected to come online in Goa, out of an estimated 35,977 rooms in the 10 metros that the firm studied.

Of these, some 1,256 new rooms will open in Goa in 2011, while none will come online in 2012. Only 160 are set to open in 2013.

“Goa is a bullish market for average room rates (ARR) because supply and demand are growing at roughly the same rate. The average three- to five-star room now costs Rs 6,500 to 6,700. It will cost Rs 7,700 by 2013,” said Samantak Das, the national head of research at Knight Frank.

But this is not so in the rest of the country, where room supply is fast outgrowing demand. Das said that through 2013, room supply would grow at a rate of around 15 per cent, while demand will grow at only around 10 per cent, translating into low or stable ARRs for three- to five-star deluxe hotels over that period.

“Of all of the new supply across India, Goa has the least coming online,” said Manav Thadani, managing director of property consultancy firm HVS-India. “Getting government approval in a state like Goa is different than in other states. Life is more difficult there when you’re dealing with the state government and the local panchayats. And we all know the reasons: bureaucracy and corruption,” Thadani said.

Thadani added that the approval process for compliance with the coastal regulation zone (CRZ) norms required by the Ministry of Environment and Forests for projects near the beach were often complicated and time-consuming, leading to much delay.

Also complicating things was the presence of archaic Portuguese laws left over from colonial times, said Partha Chatterjee, chief marketing officer, Keys Hotels, a mid-range hotel chain.

Chatterjee said that Keys, which has a hotel in the planning stages in Goa, has managed to avoid “related headaches” by hiring a local attorney to navigate the bureaucratic maze. “To be fair,” Thadani said, “the Alila Diwa Goa has opened recently, as has a Taj Vivanta property, and the Grand Hyatt is under construction. But this is nothing compared with what is happening in other cities in India.”

Take Jaipur, another tourism-driven city, said Knight Frank’s Das. In the three- to five-star range, demand is set to rise 8 or 9 per cent through 2013, but supply will spike by 15 per cent. This will translate to low ARRs in the short term, Das said.

“There are just higher barriers to entry in Goa. The local political interference is the worst in the country,” claimed Thadani. “And in a place which is supposed to be a key tourist destination.”

Source: Tehelka.com

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Sahara buys UK hotel for Rs 3,275cr

Posted by Prem , Labels: , , , , Wednesday, January 5, 2011 10:27 AM

MUMBAI: In the first crossborder deal for the Indian hospitality sector this year and also the first one for Subrata Roy's Sahara India, the Lucknow-based financial services-to-real estate conglomerate has acquired UK's iconic Grosvenor House hotel for a knock-down price of £470 million (Rs 3,275 crore) from the Royal Bank of Scotland (RBS).

The UK has been a favourite shopping destination for Indian companies, with several well-known assets like Tetley and Typhoo in the tea category, Cuticura, Erasmic and Nulon in cosmetics and premier auto brands Jaguar & Land Rover having been snapped up.

The 494-room luxury property on London's Park Lane, which was once home to the Duke of Westminster, is Sahara India's second acquisition in the hospitality sector after its 2006 buyout of Sahara Star hotel, earlier known as Airport Centaur, in Mumbai.

"This acquisition is part of the major expansion plans of the group. In addition to the acquisition of Grosvenor House, London will be the gateway for Sahara to introduce some of its new business ventures internationally," said Subrata Roy Sahara, managing worker & chairman, Sahara Group.

RBS took over Grosvenor House in 2001 after Le Meridien collapsed into administrative receivership. The bank had been looking for a buyer for Grosvenor House for the last three years. At that time, the hotel was "valued for more than £1 billion." However, unfavourable economic conditions hit valuations hard. Roy said, "The valuation, even today, is quite high but due to a highly satisfactory due diligence by RBS and after long and strict negotiations, we have purchased it for £470 million."

Richard Lewczynski of Blandford Goldsmith put the deal together for Sahara India, which has acquired the property through Amby Valley Ltd. Grosvenor House, which has the largest banquet hall in London, is managed by the US-based Marriott International and is positioned as a JW Marriott hotel since September 2008. However, following the change in ownership, Sahara and Marriott will jointly manage the property.

The conglomerate plans to refurbish Grosvenor House by offering several facilities such as an Indian restaurant under the name Namak, a night club, swimming pool and spa.

When Subrata Roy took over Sahara Star, he gave the property a complete makeover. The five-star hotel boasts of being the world's largest pillar-less clear-tosky dome structure complemented by India's biggest marine aquarium.

Kaushik Vardharajan, MD of HVS, a global hospitality consultancy firm, said, "The US and European hospitality sector continues to be under pressure with low room occupancy levels and dropping tariffs. As a result, valuation of hotels has declined significantly. This helps companies like Sahara to acquire properties at a discount."

Vardharajan added that in terms of capital investment, it works out better to acquire hotels abroad at a discount compared to building one in India. The cash flows kicks in immediately in a running hotel compared to a greenfield one.

Source: timesofindia.indiatimes.com/

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